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Earlier this year, the founder of New Zealand trust company Perpetual Guardian did something that appears to be without precedent anywhere in the world. In a bid to boost productivity and incentivise his 240 staff to maximise the time spent on meaningful work while in the office, Andrew Barnes announced a six-week trial of a four-day week, in which all full-time staff would be paid for their usual 40 hours while only having to work 32.

The supporting theory, based on reports and studies of worker motivation and productivity, is that giving people more time to spend managing their personal responsibilities will energise them for their professional ones.

As flexible working arrangements (FWAs) go, Perpetual Guardian's is exceptionally bold. In the literature, FWAs can include everything from weekend work to shift work, overtime, annual-hours contracts, part-time work, job sharing, flexitime, temporary/casual work, fixed-term contracts, home-based work, teleworking and compressed working weeks, but there is no example available of another company that has reduced work hours while maintaining full-time pay.

Where there is mounting evidence is that these mutually beneficial agreements between employers and employees (providing alternate options as to when, where and how much a person works) have a real psychological, social and economic impact:

1. FWAs are low-cost. Every benefit a company offers to attract and retain talent comes with a cost – free health insurance, extra leave entitlements, extra retirement fund contributions. FWAs, on the other hand, can cost a company nothing upfront but deliver high rewards in worker engagement, productivity and retention. More than that, FWAs can reduce costs. For instance, allowing people to work offsite some of the time cuts down on office space requirements and potential overhead costs; and an employee who has a sick child can simply work at home while caring for the child, rather than taking a sick day and costing the business.

2. Employees with FWAs instinctively give more. Within the FWA literature, social exchange theory has been used to explain behaviours such as increased effort, which may be returned to an employer as a benefit in exchange for FWAs. Put another way, employees who have FWAs may work harder as an additional form of payback. Organisations that offer FWAs are signalling to employees that their well-being matters; this signal promotes greater psychological commitment from the worker and lessens their tendency to leave the company.

3. FWAs reduce turnover and absenteeism. From an HR perspective, non-standard work patterns have been found to be related to decreased turnover in the private sector, while working away from the office was related to improved performance and reduced absenteeism. In general, absenteeism is less common in environments where managers are supportive of employees' need for flexibility, because employees have the capacity to work longer hours (on a flexible basis) before work-life conflict becomes problematic. Companies that have fewer staff absences and resignations are making substantial cost savings, aside from all the intangible benefits. Deloitte quantified their turnover-related cost savings due to the availability of FWAs at $41.5 million in one year alone.

4. FWAs are linked to better financial performance. A study of the impact of Fortune 500 company profits in the Wall Street Journal found that firms' stock prices rose an average 0.36 per cent following announcements of flexibility initiatives. When looking at workplaces with established FWAs, researchers also found a positive association between the availability of FWAs (both remote working and schedule flexibility) and long-term financial performance.

FWAs are linked to a reduction in errors customer complaints; Deloitte reports that 84 per cent of clients are satisfied or very satisfied with the service provided by employees with FWAs, and only 1 per cent of clients are dissatisfied.

6. FWAs massively reduce worker stress. When people are travelling to work every day during standard hours there are two main areas of stress: having to commute in peak traffic, and times when the job demands they stay late and miss out on the evening meal with family. Commuting in bad weather has also been cited as a cause of stress. If these factors are ameliorated or removed, the benefit to employees is massive, and includes higher job satisfaction and lower rates of burnout, depression and anxiety. People with more family commitments find FWAs especially beneficial because they can balance their work and life obligations, which is often impossible without flexible work.

7. FWAs improve interpersonal relationships. A corollary to the previous point is reduced psychological distress resulting from decreased work-family conflict. People with FWAs have more energy and psychological investment available for relationships, which tend to improve as a result, making for happier workers.

8. FWAs can raise safety and productivity levels. In times of inclement weather (and a higher risk of accidents), a work-from-home arrangement can allow employees to forgo the commute and telecommute safely from home. Hours that would otherwise be spent in traffic can be spent on productive work. For example, widespread FWA models across industry in Auckland would reduce the traffic congestion that is currently costing the city $1.3 billion a year, according to analysis by the NZIER.

9. FWAs enhance the whole workforce. Many firms are now focused on improving the gender balance and closing the pay gap – but if you bring more women into the workforce, you have to offer more flexibility to allow for family/childcare obligations. FWAs allow a lot more people to become employable and employers to draw from a deeper pool of talent, with work-from-home arrangements – the Rolls Royce of flexible work practices – allowing skilled women who might otherwise be at home with young children to take on paid work. Tech advancements allow for remote conference calls and webinars, and organisational cohesion is maintained by periodic face-to-face meetings with the team.

Dr Frances Pitsilis is a medical doctor specialising in stress management and holistic and integrated medicine. She is qualified in Occupational Health and Safety, nutritional, preventative and regenerative medicine, and is a Fellow of the Royal New Zealand College of GPs.